The investigation was opened last Friday, acting on a complaint filed March 15 by the European Bicycle Manufacturers Association on behalf of at least 25 percent of EU’s bicycle producers. EMBA alleges that the government of the People’s Republic of China is granting exemptions from income and other direct taxes and tariff exemptions to Chinese manufacturers, violating a protection enacted in 2009 by the European Council against subsidized imports from countries outside the European Community.

EMBA claims the Chinese government subsidies include preferential tax policies, loans and interest rates, income tax credits for domestically-owned companies purchasing domestically-produced equipment and a corporate income tax refund program to reinvest profits of a Foreign Invested Enterprise in export-oriented businesses.

These types of schemes should be considered subsidies because they involve a financial contribution from the government and benefit exporting bicycle producers, EMBA said. This has harmed EU producers because Chinese imports have increased in numbers and market share in Europe, which has had a negative impact on EU producers.

China’s Commerce Ministry fired back on Saturday, saying the investigation lacks evidence. In a statement posted on its website, the ministry said that bicycles imported from China account for only 2 to 3 percent of the EU market, and cannot pose a threat to the market. Complete bikes imported from China are subject to 48.5 percent anti-dumping duties, although that regulation is currently under review.

EU manufacturers produce about 12.3 million bikes per year, a significant chunk of the approximately 19.5 million bikes sold annually in the 27 member states.

The Commission’s investigation will determine whether bike producers are receiving subsidies, and if so, whether it’s negatively impacting the EU’s industry, and whether provisional measures should be imposed. The investigation must be completed within 13 months.